A major Australian energy company says it believes geothermal resources in parts of the outback have enormous potential to meet the nation's future energy needs.

Origin Energy has established a new joint venture with Geodynamics Limited to explore for shallow geothermal resources in the Eromanga Basin in south-west Queensland and parts of far north South Australia.

The exploration will focus on developing renewable energy generation.

Origin spokesman Andrew Stock says geothermal could play a significant role in providing Australia's future energy needs if its potential can be realised.

"It is another significant investment and commitment by Origin to its belief that in the medium term this is a huge resource that if we can - in a sense - crack the nut as to how it can be developed, it is worth staying the course," he said.

"That's what we're doing in opening up this new opportunity with Geodynamics."

Mr Stock says the initial work will include drilling and testing two wells at a cost of about $10 million.